I've got another question about Banking and Loans. When banks lend money don't they lend out the depositors money? This leads me to the question of why over all the years that I had term deposits & other bank accounts (at times there have quite substantial amounts for periods of time) I have never seen a debit entry to say that the money in my account has been lent to somebody else? My bank account always shows the full amount plus interest. I know that this is a simplistic approach but can anybody offer an easily understandable answer. Because in the book of accounts for business interests if I give money to somebody that money disappears from my account! How can a bank be different? Thanks Dan

My bank account always shows the full amount plus interest. I know that this is a simplistic approach but can anybody offer an easily understandable answer. Try this: You say you've previously got a loan from the bank. Did you take the money out in $100 notes and then store them safely in your home in case the bank asked for their money back? Or did you use it for another purpose, for example spend it? Did you worry that if the bank asked for their money back tomorrow, you wouldn't have enough legal tender to cover it? Did you write to the bank informing them of the location of the currency you borrowed? ( Dear Bank, the $10,000 you lent me is currently located at Joe's Car Yard, Parramatta Rd Homebush... ) Or did you think that the bank lent you the money on trust, assuming that when you were due to repay it you would have arranged your affairs such that you would be able to do so? Wog

read thread above 10/01/04 on Fractional Banking Or more fundamentally, read about double entry bookeeping. gtoomy

Parramatta Rd Homebush... ) Or did you think that the bank lent you the money on trust, assuming that when you were due to repay it you would have arranged your affairs such that you would be able to do so? They accepted the conditions under the contract agreement and I accepted theirs. But take a look at these figures from the Annual report of an Aussie Bank. As of 30/9/2003 Assets Cash                                             1,736 Due from other fin instit                  6,035 Trading and invest securities         12,449 Loans & Acceptances                164,261 Life insurance assetts                    10,522 other assetts                                  26,286 Total assetts                                221,339 Liabilities Due to other fin instit                           3,831 Deposits & other public borrowings 129,071 Debt issues                                        29,970 Acceptances                                        3,788 Life insur policy liabil                            9,896 Loan Capital                                        4,544 other liabil                                           26,243 Total liabilities                                   207,343 Total Equity                                         13,996. What I have trouble with are the entries Loans & Acceptances                                164,261 (Assetts) Deposits & other public borrowings            129,071 (Liabilities) Isn't   Deposits & other public borrowings  129,071  made up of deposits that are not really there as they have been given to the people with the Loans & Acceptances     164,261. I understand the accounting conventions and principles of how these appear in the balance sheet etc , but the question I ask are all those deposits 'really' there?? And another interesting observation is that the have more Loans & Acceptances than Deposits & other public borrowings. Have they 'loaned' more than the have in deposits etc?? Accounting is a such a beautiful art! I accept that the balance sheet is correct in agreed company reporting standards and is ASIC  & APRA compliant but it's the underlying basis of the principles used that I am now starting to question. Is there a better way to do things other than this debt _base_d system ( I dislike the term credit _base_d) that leaves so many people on the financial scrap heap. Also do you know how much tax you really pay? I'm sure most would have no idea. There's PAYG, GST, direct & indirect excices, state levies & charges etc. I agree taxes must be paid for overall functioning of our society. But I do question the level & rate especially when used to service large interest bills on public debt etc when there just could be a better way to do things. Dan - Hide quoted text -- Show quoted text - Wog

I've got another question about Banking and Loans. When banks lend money don't they lend out the depositors money? This leads me to the question of why over all the years that I had term deposits & other bank accounts (at times there have quite substantial amounts for periods of time) I have never seen a debit entry to say that the money in my account has been lent to somebody else? My bank account always shows the full amount plus interest. I know that this is a simplistic approach but can anybody offer an easily understandable answer. Because in the book of accounts for business interests if I give money to somebody that money disappears from my account! How can a bank be different? Thanks Dan What eveyone else said, and do some reading on financial intermediaries. Banks save you the trouble of a direct relationship with borrowers, so your deposit statement deals only with the money the bank owes you.